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Debt Consolidation Calculator

Compare your existing debts with consolidation loan options

Existing Debts

Consolidation Loan

Fee: $200

Recommendation

Debt consolidation appears beneficial. You will save money on interest and potentially reduce your monthly payment.

Comparison

MetricCurrent DebtsConsolidation
Total Balance$10,000$10,000
Monthly Payment$450$313
Interest Rate17.40% avg8.00%
Real APR17.40%9.38%
Payoff Time2 years 8 months3 years
Total Interest$2,450$1,481

Savings Analysis

Monthly Payment
-$137
Total Interest
-$969
Payoff Time
+4 months

Understanding Debt Consolidation

What is Debt Consolidation?

Debt consolidation involves combining multiple debts into a single loan, typically with a lower interest rate. This can simplify your finances by reducing multiple payments to just one and potentially save money on interest charges.

Real APR vs. Advertised Rate

The real APR includes all costs of borrowing, including upfront fees, points, and other charges. This calculator shows the true cost of consolidation by factoring in these fees, which can significantly impact whether consolidation is financially beneficial.

When Does Consolidation Make Sense?

  • The consolidation loan has a lower real APR than your current debts
  • You can afford the new monthly payment
  • The total cost (interest + fees) is less than your current debts
  • You're committed to not accumulating new debt

Important Considerations

  • Loan fees matter: High upfront fees can negate interest savings
  • Longer terms: While monthly payments may be lower, longer loan terms can mean more total interest
  • Credit score impact: Consolidation may temporarily affect your credit score
  • Spending habits: Address the root cause of debt to avoid accumulating more

Alternatives to Consolidation

Consider other debt repayment strategies like the debt avalanche (paying off highest interest debt first) or debt snowball (paying off smallest balances first) methods. Sometimes these approaches can be more effective than consolidation, especially if you can maintain discipline with multiple payments.